Doing Business in Iraq: 10 Smart Rules
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With Iraq's security improving, is it time to do business there? Here's how to navigate Iraqi laws, incorporate, and deal with political risk and corruption
Doing business in Iraq does not have to be scary. In July, Iraqi Prime Minister Nouri al-Maliki visited the U.S., and part of his mission was to convince American companies to invest in his country. He made the case that security has improved substantially. By any measure, he is correct. Although Iraq is not yet completely stable, a window of opportunity has opened there for companies willing to take a risk in one of the ultimate emerging markets. Indeed, Iraq has the second-largest oil reserves in the world and, after many years of war and sanctions, it needs infrastructure and development across all sectors of the economy. Once you become comfortable with the security situation, you will find the possibility of profits is great.
Yet companies entering Iraq also worry that they face conflicting laws and a dearth of information on how to do business there. Whether you have previously done business in the country or not, here are 10 things to ease your anxiety:
1. No immunity from Iraqi laws. Until this year, companies operating in Iraq under contracts with the U.S. government or other coalition countries enjoyed absolute immunity from the laws of Iraq. On Jan. 1, the Status of Forces Agreement went into effect and abolished that immunity. Loss of immunity means foreign companies and individuals are subject not only to criminal and civil liability in Iraq, but also must obey all legal and regulatory requirements for doing business there, including the entry and exit procedures, tax laws, and vehicle registration requirements. Moreover, all foreign individuals or companies engaged in commercial activities must obtain a license from the government of Iraq. It can be a cumbersome process, but the government of Iraq is working to make it easier and is not yet rigorously enforcing the law.
2. Forming a trade representative office. The simplest way to establish a commercial presence in Iraq, especially for foreign companies seeking contracts with the government, is to register as a trade representative office. By registering as a trade representative office, a foreign company receives the right to engage in business development activities in Iraq and to enter into negotiations for contracts with specific Iraqi ministries. The procedure to register as a trade representative office is simple, requiring the filing of a few forms, appointment of a "manager," and payment of a small fee. Most ministries in Iraq do not require any further licensing to bid on a contract. If and when a foreign company secures a contract with the government, it can then transfer its trade representative office into a "branch office."
3. Incorporation or forming a branch office. C.P.A. Order No. 93, which has been incorporated into Iraqi law, provides that non-Iraqi companies may form and operate through a "branch office." In recent years, registering a branch office has been the quickest way to set up an office to engage in commercial activities in Iraq (as compared to a trade representative office that can engage in business development activities only). Many companies now operating in Iraq are set up as branch offices, but face some restrictions on what they can do. For foreign companies wishing to establish a separate corporate entity for doing business in Iraq, rather than a branch office, there are a range of incorporation options, including the Limited Liability Company, Joint Stock Company, joint liability company, sole owner company, and simple company. Selecting the best entity depends upon the extent investors want to be shielded from liability, the number of investors, whether public and private investors will be involved, and the tax implications. The most popular forms of incorporation for foreign-owned entities are the Limited Liability Company and Joint Stock Company.
4. Paying taxes. Foreign companies doing business in Iraq are often perplexed by the tax system. Iraq's tax rules are antiquated and contain numerous ambiguities. In general, Iraqis and non-Iraqis residing in Iraq must pay tax on income that originates there.
The income tax laws of Iraq define taxable income as net income earned from commercial activities or from activities having a commercial nature. Income from limited liability companies and joint stock companies is taxed at a fixed rate of 15%. Foreign companies should seek specific advice on how their business will be treated under Iraq's tax laws and how to track and report that income.
5. Obtaining an investment license. During the Saddam Hussein regime, the law discouraged foreign investment. Only Iraqis could form companies in Iraq, and those foreign companies that opened branch offices faced strict rules related to their commercial activities. In October 2006, the government of Iraq enacted the National Investment Law, which contains incentives for foreign companies to invest, including an exemption from taxes and fees and a guarantee that foreign investor capital will be treated equally to domestic investor capital. Under the law, companies must apply for and receive a project-specific investment license from either the national or a regional investment commission to avail themselves of the incentives. In addition to receiving 10 years of tax-free treatment, licensed projects are guaranteed full repatriation of investment profits, the right to employ foreign workers, and a three-year exemption on import fees for equipment required for the project. The Kurdistan regional government has passed its own investment law which contains a few additional incentives.
6. Owning property. Most countries in the Middle East restrict ownership of property by foreigners. For now, the government of Iraq has kept in place these traditional prohibitions. Although it permits long-term leases for foreign companies, ownership of real property is not permitted. The Kurdistan regional government, through its regional investment law, does allow ownership of real property within the three northern provinces that make up the Kurdistan Region. The central government is currently considering a similar change in the law, which is supported by Prime Minister Maliki and the chairman of the National Investment Commission, Sami al-Araji.
7. Political risk. The risk of political instability poses the potential for disruption to business activities of foreign firms throughout the Middle East and North Africa. In Iraq, the risk is multifaceted. The country has made great strides since reaching the brink of civil war three years ago. This progress is demonstrated in the improved security situation. However, there are still significant fault lines. The majority Shiite Arab population is divided, and discord remains among rival militias that have been more quiet but still exist. Major steps toward reconciling Sunni Arabs have been accomplished by the Shiite-led government, but the situation is fragile and more progress is necessary to incorporate private Sunni fighters, including the Sons of Iraq, into Iraqi Security Forces and other government jobs.
The Kurdistan Region faces its own set of challenges to future stability. It is surrounded on all sides by neighbors who oppose its semi-autonomous state. Turkey, in particular, is threatened by Kurdish aspirations, even as Turkish companies have become the Kurdistan Region's most significant trading partners. Also, the unification of the main political factions in the Kurdistan Region is relatively new and subject to a delicate compromise among the charismatic leaders of each party. There is also tension between the Kurdistan regional government and the federal government over certain economic and political issues, including management and sharing of revenues for Iraq's new oil fields. The key point to take from this is that foreign companies must obtain a keen understanding of the political landscape in the regions and provinces of Iraq in which they do business to evaluate fully the risk to their business ventures.
8. Corruption. Iraq ranks near the bottom in Transparency International's annual Corruption Perception Index.
The problem of corruption is widespread, and foreign businesses operating in Iraq are impacted in a number of ways. For instance, foreign companies have had local partners forced on them and have faced problems in receiving full payment for services or products. American companies operating in Iraq must be particularly careful not to engage in any actions that could be deemed a violation of the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits providing anything of value to influence an award of government business. U.S. companies should consider training their business development personnel on FCPA. The good news is that the government of Iraq is committed to attracting foreign investors, especially U.S. companies, and therefore will try to resolve specific acts of corruption. Therefore, foreign companies that find they are facing a corruption issue should seek to elevate it quickly to the highest levels of the government of Iraq.
9. Enforceability of contracts. The legal system in Iraq is centuries old with long-established traditions. Yet it deteriorated greatly under Saddam Hussein and further during the recent conflict. Assistance from the U.S. and other coalition countries has introduced some modern concepts, but more work is required to incorporate international standards for regulating business and resolving disputes. Whenever possible, foreign companies should incorporate arbitration and forum selection clauses into their contracts to take advantage of more familiar venues and laws for resolving disputes. Companies also should keep in mind, though, that Iraq is not yet a signatory to the New York Convention, the main treaty that ensures enforcement of foreign arbitral awards.
10. Entry and exit. Obtaining permission to enter Iraq was nearly automatic for U.S. government contractors before the Status of Forces Agreement. Removal of immunity made all foreign company employees subject to Iraq's visa procedures. Visas now must be obtained from an Iraqi embassy in advance of any trip there. The visa process can sometimes take weeks or even months. Obtaining a letter of approval from an Iraqi trade official, such as the Commercial Attaché, National Investment Commission, Kurdistan Regional Investment Commission, or other Iraqi representative offices can significantly expedite that process. Moreover, any foreign company that receives an investment license should receive guaranteed entry and exit for its employees.
While any business expanding abroad is certain to face unexpected challenges, understanding and planning around the 10 points above should make the prospect of investing in Iraq safer and more productive.

Swiss Teams Switzerland

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As in all countries the Swiss will celebrate the benefits of team working and warn of the threats of ignoring a 'team-based' approach. It is doubtful, however, whether the Swiss approach to team working would be understood or approved of in certain other countries.

In Switzerland, people prefer to be allowed to have the freedom and individuality to be left alone to perform their allocated tasks, free from external interference or close supervision. 'If I am technically competent and diligent, then I can perform the tasks you give me to the required standard.'

Thus, the idea of a team leader using his or her interpersonal skills to motivate individuals to work together to achieve a common goal sits uneasily with this Swiss penchant for being allocated a task and then being allowed to complete it in an unaided and unsupervised manner.

This approach to team work seems to work because all the individuals in the team can be trusted to perform to a high level and have the required depth of technical knowledge.

Background To Business in UAE

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The United Arab Emirates consists of seven states: Abu Dhabi, Dubai, Ajman, Fujairah, Ras al Khaimah, Sharjah and Umm al Qaiwain. Each of these states has its own identity and individual characteristics (some are more liberal in their attitudes to clothing etc. than others) but they also share a great many commonalities and this country profile will concentrate on the commonalities and, as such, can be used as a guide to all the states which comprise the UAE.

A key issue to bear in mind when doing business in the Emirates would be the cosmopolitan nature of the population. Over 80% of the population of the region are non-locals. It is almost more likely, therefore, that you will be doing business with a western expatriate then with a local Emirati.

A key question to ask before starting any project in the UAE would be: ‘Who am I dealing with?’ Obviously,dealing with an American expatriate will require a different approach than when dealing with a local. Do some research in advance and work out, not only who you will be dealing with directly, but also who is the final decision-maker. You may be dealing with an American - but are they reporting to a local, senior business man?

Another key issue to bear in mind is that,beneath the veneer of Westernisation, the Emirates remain a region heavily influenced by the all-embracing influence of the teachings of Islam. There is little separation between religion, life in general and business – they are all interlinked in a way that is alien to most western business people. Show great respect to local religious sensitivities at all times – not to do so could be a real deal-breaker.

Background To Business in Switzerland
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Switzerland has a reputation for order, decency and an almost obsessive desire for security. The Swiss are, for example, the most heavily insured nation in the world - a fact reflected in the number of insurance and re-insurance businesses based in the country - and have the highest per capita insurance spend. These characteristics permeate every aspect of Swiss life and also percolate down to the business level.

Thus, the Swiss approach to business can be classified as orderly and thoughtful where pre-planning and risk-aversion are to the fore. The type of crisis management apparent in countries such as the UK, where the ability to deal with unexpected events as they occur is highly prized, would be viewed as haphazard and as showing a lack of control.

Although containing a sizeable number of Italian and French speakers', business comes very much before relationships in Switzerland. Respect is earned through the display of professionalism and technical competence rather than through the ability to cultivate the right quality of personal relationships.

Surprisingly, despite the regional differences which are more obvious in Switzerland than in most other countries, there seems to be a surprising degree of homogeneity in approach to business life throughout the country. The obvious exception to this homogeneity is in attitudes to communication, which are very much determined by the native language of the individual

Background To Business in Switzerland
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Switzerland has a reputation for order, decency and an almost obsessive desire for security. The Swiss are, for example, the most heavily insured nation in the world - a fact reflected in the number of insurance and re-insurance businesses based in the country - and have the highest per capita insurance spend. These characteristics permeate every aspect of Swiss life and also percolate down to the business level.

Thus, the Swiss approach to business can be classified as orderly and thoughtful where pre-planning and risk-aversion are to the fore. The type of crisis management apparent in countries such as the UK, where the ability to deal with unexpected events as they occur is highly prized, would be viewed as haphazard and as showing a lack of control.

Although containing a sizeable number of Italian and French speakers', business comes very much before relationships in Switzerland. Respect is earned through the display of professionalism and technical competence rather than through the ability to cultivate the right quality of personal relationships.

Surprisingly, despite the regional differences which are more obvious in Switzerland than in most other countries, there seems to be a surprising degree of homogeneity in approach to business life throughout the country. The obvious exception to this homogeneity is in attitudes to communication, which are very much determined by the native language of the individual

Arab Communication Styles
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One of the most difficult concepts for many other cultures to grasp is the need to offer flattery in many business situations. Arabic is a language of hyperbole, where the merits of others are praised and overtly commented upon. Therefore, during the relationship-building process, it is important to offer compliments to your host, his organisation and the Muslim world in general. You, in return, will be complimented. Do not seem distant, aloof or embarrassed if this happens - take the compliments in the spirit they are given.

You may be asked questions which seem overly familiar at a very early stage. Questions about marital status, children, religious convictions and personal wealth are commonplace. If you feel uncomfortable answering such questions, have a ready supply of stock answers at your disposal. Refrain from saying that you are an atheist as this is incomprehensible in a society in which the absolute existence of a monotheistic deity is a given.

People are reluctant to convey bad news to you about any business issues. When this characteristic is combined with natural Arabic hyperbole, it is important to maintain a sense of perspective when being given very positive feedback about any particular proposition.

Do not be surprised if people seem somewhat aggressive in meeting situations. Speaking volubly and with a rising tone shows sincerity. This denotes engagement and interest and is in no way a negative sign. (The ability to converse in this manner is a much-admired characteristic in the region.)

Finally,be aware of the importance of good,strong eye contact. A man's sincerity and honour can be judged by their ability to look you in the eye. This can be somewhat uncomfortable for those from cultures with much weaker eye contact (many Asian countries) but efforts must be made in this area.

Women in Business in UAE

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The situation in the UAE is very different than in neighbouring Saudi Arabia where opportunities for women are very restricted.

There is an increasing sense of entrepreneurship amongst local women which means that conditions have changed considerably in the past ten years or so. Although it is still possible to meet local men who show an overt gender bias (and these older, more traditional men are often the decision-makers), it is becoming increasingly common to encounter women in business in all sectors of the economy.

These changes have probably been driven by the sheer number of expatriates who work in the region and the influence of the many multi-national corporations who operate there and who import their beliefs on gender equality (a well as other diversity strands). It is impossible to say there is no gender bias in the UAE (Dubai is probably the most liberal of the states) but international women business travellers shouldn’t find this too much of an issue.
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Arab Teams
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As with most strongly hierarchical cultures, teams tend to be thought of as a group of individuals working to a strong leader. The leader tells individual team members what to do and the team members report back directly to the leader. Therefore teams tend to work vertically rather than horizontally.

In any case, for a team to work well together, everybody needs to have formed a strong bond. Traditionally teams would have consisted of extended family members working together – and so the bonds were already formed. It can be difficult to bring a group of locals together who do not know each other and expect them to work easily as a team from the beginning. In such a situation, people tend to display suspicion of one another and progress can be slow.

Within any gathering of Emiratis, hierarchy will always be present and even if you wish to develop a flat system within the team, it is likely that traditional class and family issues will result in an unofficial hierarchy developing very quickly indeed

Arab Teams

As with most strongly hierarchical cultures, teams tend to be thought of as a group of individuals working to a strong leader. The leader tells individual team members what to do and the team members report back directly to the leader. Therefore teams tend to work vertically rather than horizontally.

In any case, for a team to work well together, everybody needs to have formed a strong bond. Traditionally teams would have consisted of extended family members working together – and so the bonds were already formed. It can be difficult to bring a group of locals together who do not know each other and expect them to work easily as a team from the beginning. In such a situation, people tend to display suspicion of one another and progress can be slow.

Within any gathering of Emiratis, hierarchy will always be present and even if you wish to develop a flat system within the team, it is likely that traditional class and family issues will result in an unofficial hierarchy developing very quickly indeed

Arab Meetings www.arabswiss.ch
Meetings can be confusing affairs as they are often subject to unforeseen interruptions and alterations. Don’t expect the standard western approach of meeting room, punctuality, agenda, action points etc.

Punctuality is variable in the UAE and a meeting scheduled to start at 10am might start on time but may well start an hour or more late. It is also difficult to predict the end time of a meeting with any degree of accuracy - which can make it difficult to visit the UAE and arrange three meetings in the morning, followed by three meetings in the afternoon. Two meetings a day is probably the safest option.I

t is not uncommon to arrive at your meeting to find your host in a meeting with several other people and that these other people could be meeting your host about completely disconnected issues. This process can make meetings very lengthy and it can be a little frustrating if you don’t get the complete attention you feel you deserve.

Some people recommend setting up meetings at the up-market local hotels where you can serve coffee and refreshments – and where you are less likely to be interrupted as frequently! In the UAE, relationships are all-important and meetings will often start with a lot of seemingly trivial small-talk. Do not underestimate how important this relationship building process is to the overall success of your project. Make time to chat – the rewards will flow in the long-run.

Arab Management Style

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Local management style will be directive and paternalistic. Managers are expected to give clear and direct instructions to their subordinates and the subordinate will be expected to carry out the instructions to the letter. Lack of clear directional leadership will be seen as confusing (at best) and at the extreme, as very poor management. As a result of this approach, it can appear to outsiders that local managers are overly abrupt or eve rude with their staff.

It is important to think of these internal relationships in terms of a family. The boss is the ‘father’ and the employees are the ‘children’. The father tells the children what to do but also looks after them and cares for them. The ‘children’ do as they are told and show their father ‘respect’. It is a two-way relationship in which all parties benefit.

One of the by-products of this paternalistic management style can be a lack of initiative. Employees do what the boss tells them to do but no more. To do more than you are told would be to disobey your boss. Therefore,make sure that any instructions are delivered clearly, precisely and comprehensively. If you don’t,t hings might not get done at all

International Communicationhttp://www.aranswiss.ch

Self-promotion and self-deprecation

Certain cultures find it difficult to speak positively about themselves and prefer to understate their abilities and self-deprecate about themselves in general.

Other cultures, however, are much more self-promotional and would find it bizarre to say they were not very good at something when in fact they were skilled in that area. These cultures will only say they are not good at something if they genuinely have a problem in that area.

People from cultures which prefer understatement often find colleagues and clients from more self-promotional cultures to be aggressive and arrogant whereas people from the more self-promotional cultures will often take on face value the understatement of other cultures – they believe them if they say they have a weakness!

Self-deprecating cultures include:
Japan, China, Korea, UK, Finland

Self-promotional cultures include:
USA, Australia, France, Brazil

Written and spoken word

Some cultures place far greater emphasis on the importance of written communication between people. Only when something has been communicated in writing does that issue become a reality

Other cultures place much greater emphasis on the value of spoken communication – things are only really believed when they have been communicated by people with whom they have a strong, trusting relationship.

This simple fact can have a major impact on communication flow and the achievement of objectives within an international team. Do you communicate to each team member in exactly the same format regardless of their cultural background? Might it be a good idea to communicate more information orally to certain people if you want them to fully ‘buy-in’ to what you want to achieve?

Written-word cultures include:
Germany, UK, USA, Sweden, Netherlands

Spoken-word cultures include:
Spain, Italy, Saudi Arabia, India, Brazil

Use of English

Non-native speakers need to be given every assistance to ensure that they can fully participate in international meetings and conference calls.

Be aware of the following at all times:

•Control Your Speed
•Keep at the forefront of your mind: slow down, slow down, slow down
•Speak at the same pace regardless of who you are talking to
•Don’t speak more slowly to non-native speakers only to speed up when conversing with other native speakers

Arab Business Structures UAE

The question,‘Who am I dealing with?’ is also critical when thinking about company structures and how they impact on the interface with any local organisation.

Are you dealing with the subsidiary of an international organisation headquartered outside the UAE? If so, they are likely to be heavily influenced by the approach,processes and methodologies of the parent company – and the key staff are likely to be expatriates.

If, however, you are dealing with a locally owned business you are likely to find that they are family-owned and controlled. Nepotism is a still a way of life and key positions will often be filled by trusted family members. Who can you trust if not your own family? As with most family-owned organisations,t he company will be organised along strongly hierarchical lines with the majority of power being held at the top by the senior, usually older, male family members. It is important to try to get access to these key decision-makers, even if you are initially being dealt with by more junior employees.

All major decisions will be made at the top and you will need influence at that level. As all business is family and relationship-based, it is absolutely vital to be prepared to devote as much time and effort as necessary to relationship-building. Every contact within an organisation is important, as you may not be aware of everybody's connections. A seemingly lowly employee may prove to be a favoured relative of a senior figure and therefore of greater potential help than some other apparently more important contact.

It is also important to find out if the company you are dealing with is Sharia law compliant. If a company is Sharia law compliant, this will mean that the company is subject to the tenets of Islamic law and its actions will be overseen by a Sharia council consisting of appointed Muslim clerics. This Sharia council will monitor the activities of the organisation to ensure that no Koranic edicts are transgressed,